Bond valuation

Author: Chuck Baran

This program uses the present value of an annuity and present value of a dollar to compute the value of the bond at time zero or present day value. It makes the assumption that the par value of the bond is $1000.00. All that is required is to enter the interest rate on the bond, the discount rate or required return on a bond, and number of years to maturity.

After that hit the exe button. I put all three lines on one graph. The top line represents the value of the bond in thousands and is the combination of the resent value of the bond and the present value of the annuity, which is the yearly interest payment. The second line is the present value of the bond. This can be thought of this way, how much money do you need to put into the bank today, at the interest rate of the bond, to equal the $1000.00 at maturity. The third line is the amount of money required today to be able to pay the annual interest rate to the purchaser.



After you tap the screen and you can see the number of years to maturity and values of the bond, annuity, and total value.

Bond Value
i=12;//Interest Rate
dr=8;//Discount Rate
n=0:15;//Years to Maturity

dr=dr/100;
I=1000*(i/100);

fmt(1,9,2,0)
PVIF=1000*(1*(1./(1+dr).^n));
PVIFA=I*((1-(1./(1+dr).^n))/dr);
Total=PVIF+PVIFA;
plot(n,PVIF,PVIFA,Total)
ylabel('Values')
xlabel('Years From Maturity')

Values=[n' PVIF' PVIFA' Total']